Cigarette Smugglers Still Love New York and Michigan, but Illinois Closing In
From: Mackinac Center
By Michael D. LaFaive, Todd Nesbit, Ph.D., and Scott Drenkard
Executive Summary
In the newest iteration of our annual cigarette smuggling study, we find that New York remains America’s number one smuggling state for inbound, illegal traffic at 58.0 percent of the total market. That is, of all the cigarettes consumed in the Empire State in 2013 — legal and illegal —58 percent were smuggled in. We also estimate that nearly 25 percent of the Michigan cigarette market is comprised of contraband smokes.
Something should be done about the nation’s rampant smuggling problem. High excise taxes on cigarettes have led to all sorts of unintended consequences: smuggling; violence against people, police and property; product and tax stamp counterfeiting and even the financing of terrorist groups. Policymakers can roll back this illicit trade — if interested — by cutting taxes, or adopting smarter and more intensive police tactics or both.
Our smuggling study — conducted this year in concert with the Washington, D.C.,-based Tax Foundation — is constructed to compare adult smoking rates per capita with legally paid sales. The difference between the two by state has to be explained, and we believe the difference is from cross-border activity, most of which is illegal smuggling of two varieties: casual and commercial.
Casual smuggling occurs when individuals cross state lines to buy cigarettes or do so on the Internet and typically for personal use. Some states permit a modicum of cross-border traffic for personal use and our study sweeps that traffic into its smuggling estimate. Commercial smuggling involves long-haul, large shipments from lower tax states such as North Carolina or Virginia.
Smuggled Cigarettes Make Up more than One-Third of Consumption in Some States
